People’s Bank driving economic recovery through MSME empowerment

It is no new knowledge to know that the empowerment of Micro, Small, and Medium Enterprises (MSMEs) in the present context of Sri Lanka is an absolutely vital strategy to drive the much sought after economic recovery andlong-term development. MSMEs constitute a substantial part of the country’s economy, comprising over 75% of all enterprises, generating 45% of employment, and contributing 52% to the GDP.

Accordingly, there is a pressing need in the nation to support what the experts call the ‘backbone of nation’s economy’in order fuel fiscal revival and boost national growth. However, despite the emphasis placed on MSME’s, the sectorstillfaces numerous challenges such as the limited access to finance, inadequate infrastructureand regulatory hurdlesthat hinder them from thriving as lucrative industries.

Recognizing this situation, the People’s Bank of Sri Lankais seeking to bring the spotlight towards empowering MSMEs as a foundation for economic resurgence.

As an organizationcommitted towards supporting MSMEs, the People’s Bank of Sri Lanka plays a pivotal role in leading the vital empowermentof MSMEs by providing them withthe necessary financial support, resources, and expertise.

Known to be the 2nd largest state-owned commercial bank in Sri Lanka, the People’s Bank of Sri Lanka is recognized both locally and internationally as one of the best performing and highly decorated banks operating in the island nation.

People’s Bank Deputy General Manager in Enterprise Banking Wickrama Narayana recently sat down with Daily Mirror to highlight the strategic importance and commitment placed by the People’s Bank for the empowerment of MSME’sas a key to build a resilient and prosperous economy.

Following are the excerpts of the discussion:

Tell us how has the journey been for the People’s Bank in supporting small businesses, especially considering the currenteconomic context in Sri Lanka?

I think as a bank we have made substantial progress (from the crisis period). Our asset base has exceeded 3 trillion rupeesand our loan book is approaching 1.9 trillion. Last year, our profits were somewhat sluggish due to granting many moratoriums particularly to underperforming SOE sectors. But despite these challenges, our balance sheet remained robust with strong liquidity and progress.

As a state-owned commercial bank, we are very competitive. Our vision is to emphasize value creation to promote productivity. During the last year we observed that exports in the country were lethargic. So, we decided to concentrate on boosting exports by redirecting our efforts more into the private sector.

But to enable the private sector, a sound ecosystem should be created for them. I think the biggest problem now is the lack of financial literacy and discipline. So, providing education, training and development are an integral part of People’s Bank now. Our latest strategies include revisiting our lending mechanisms, strengthening Regional Credit Units, establishing Export Hubs and a concept called entrepreneurship villages.

We are also hoping to extend our services into other commercial and corporate sectors, beyond SME’s.

Tell us more about the initiatives lined up by the People’s Bank to encourage exports and support the MSME sector?

In terms of exports, we identified that there are many indirect exporters who have not been able to become authorized vendors. So, we developed clusters of small business owners who are willing to transitiontowards exporting. We have conceptually named these clusters as export hubs.

But of course, we cannot support them alone. Therefore, we have partnered up with various institutions such as the Export Development Board (EDB) and the Chamber of Commerce. The EDB signed an MoU with us to share info about programs, training, and details on international trade. As of now we have established 5 regional export hubs. Through them we aim to facilitate these business clusters by providing them with education, training and insights into new trade laws and opportunities.

The second initiative is that we have developed 48 entrepreneurial villages around village entrepreneurship. Here we focus on empowering grassroots level entrepreneurship through cluster formations. Our goal is for these villages to eventually become export villages.

The third program is developing products and services designed specifically to cater MSME businesses. Our “People's Power” Loan scheme allows startups and lower-level entrepreneurs (who lack collateral) to borrow up to 1 million rupees with personal guarantees and up to 3 million rupees with traditional securities. Our Business Power Loan Scheme for SME’s not only involves lending but also develops comprehensive business plans for them to ensure their sustainable growth.

Youth empowerment and green entrepreneurship are some of the buzzwords circulating in the SME sector today. What is People's Bank's take on these trends?

On the subject of youth empowerment, last year we opened up opportunities for all graduates to provide them with a comprehensive five-day program focused on business planning and entrepreneurship. Following the training, these entrepreneurs were deemed eligible to receive concessionary business loans up to Rs. 2.5 million at a concessionary rate of interest. However, many graduates struggled to prepare viable business plans. To address this, I specifically appointed a mentor from my department to assist each of these young entrepreneurs. Our goal is to empower school graduates to become successful entrepreneurs, especially as government jobs are not always available.

Recently, we re-launched the loan scheme as “People’s Spark” allowing all young entrepreneurs below age 45 years to join with the Bank where they can enjoy loans up to Rs. 500,000 at the rate of 7% and get Rs. 1.0 million at 10%.

In terms of green initiatives, all our projects align with our Environmental and Social Management System (ESMS) policies. Our financing policy focuses on two main areas: sourcing funds and developing a project pipeline. To source funds, we will issue green bonds to ensure investors understand our sustainable project guidelines which are aligned to the Central Bank's taxonomy.

For financing sustainable projects, we have introduced the Green Power Loan Scheme, offering loans at 1% below the market rate for prime customers. We also have a separate loan scheme for Solar Power Generation Projects offered in all the regions in Sri Lanka.

What trends have you observed in the MSME sector in Sri Lanka? What strategic plans does People's Bank hope to adopt to effectively navigate and support these new directions?

Well one significant area of focus now is women in SMEs, along youth empowerment. The People's Bank is actively focusing on encouraging women entrepreneurship. We participated in the funding line offered by the Asian Development Bank (ADB), which is now moving to the next level involving gender-desegrated data collection and analysis. The ADB helped us to develop a Women Entrepreneurship Development Policy which is now adopted all across Sri Lanka. We also appointed regional women champions to take the development to a local level. Moreover, our collaborations with PwC and the IFC included numerous training and mentorship programs for female entrepreneurs.

Another focus area is the digitalization of the banking sector. I have to mention that the People’s Bank is one of the most digitally savvy financial institutions, both in retail and corporate banking. Our digital applications are very comprehensive and widely appreciated by most of our corporate clients for their convenience in accessing online services. Our platforms are highly secure with strong firewalls in place.

Also, nearly 100% of our retail loans are managed online and we are now covering 60% of corporate loan transactions by utilizing our digital platforms. Therefore, I believe we have made substantial progress to accommodate and leverage this digital trend too.